Natural Gas (NG=F) Price Hits Resistance at $3.50 as Weather Rally Faces Supply Wall

Natural Gas (NG=F) Tests Critical Levels Amid Conflicting Supply-Demand Shifts

Weather Premiums Fuel Spike, But Rally Lacks Structural Support

Natural Gas (NG=F) futures for August delivery climbed to $3.466/MMBtu, marking a strong technical bounce after a persistent June selloff. Monday’s breakout breached the top of the falling channel, establishing $3.375 as short-term support. But despite the price momentum, analysts stressed the move represents a rebound—not a confirmed trend reversal.

Forecast revisions toward less extreme heat through the end of July weighed on Tuesday’s early action, sending the contract down 2.3 cents to $3.443. Analysts warn that while hot weather can lift demand for cooling, the timing may come too late to prevent an oversupplied market this fall.

Meteorologists project high temperatures in the upper 80s to 100s across the Southwest and Texas, yet this won’t offset weak cash market signals or historically bearish seasonal trends. The EEI reported a +1.0% y/y rise in U.S. electricity output for the first week of July, but traders remain skeptical that power burn demand alone can sustain the rally.

LNG Export Recovery Adds Temporary Tailwind to NG=F

US LNG export flows averaged 15.8 bcfd so far in July, up from 14.3 bcfd in June, as liquefaction facilities gradually returned from maintenance. This lifted sentiment, especially after record exports in April at 16.0 bcfd. Still, July’s numbers remain below peak, and long-term investor appetite remains cautious due to frequent maintenance disruptions.

As of July 8, Europe’s gas storage stood at 61% full, trailing the five-year average of 71%, opening potential for export demand growth. Yet with global LNG benchmarks such as TTF in Europe trading at $12/mmBtu and the JKM in Asia near $13/mmBtu, traders anticipate cargoes may increasingly flow to Asia amid rising temperatures, potentially undermining European restocking efforts.

Supply Surplus and Weak Power Demand Signal Near-Term Resistance

Lower-48 dry gas production reached a record 107.0 bcf/day, up 3.0% y/y, while overall demand, including exports, dropped to 106.8 bcfd, with power burn at 79.5 bcf/day (-6.5% y/y). This imbalance has kept storage injections elevated. Inventories rose 53 bcf in the week ending July 4, matching the five-year average, but as of that date, total stockpiles were already 6.1% above seasonal norms.

Market participants caution that barring a hurricane-induced supply shock, further upside in NG=F remains capped by resilient output. Only 2% of US production is offshore in the Gulf of Mexico, minimizing the price impact of developing tropical activity near Florida.

European Imports and Trump’s Russia Ultimatum Shift Global Flow Dynamics

The European Union remains a key driver of US natural gas strength. Despite softer domestic demand, rising European imports of US LNG are helping balance excess supply. Yet this trend faces risk: President Trump’s 50-day ultimatum to Russia has temporarily eased fears of near-term gas supply disruptions, pushing European benchmark TTF gas down 1.7% to €34.85/MWh.

Analysts warn that if the ultimatum coincides with Norway’s seasonal maintenance window in late August, supply uncertainty could return fast. Should demand in Asia continue climbing on heatwaves, competition between Europe and Asia for marginal LNG cargoes could erupt by September.

Technical Indicators Flash Compression, Await Breakout Catalyst

NG=F is locked in a technical coil between $3.38 and $3.47, with momentum flatlining near the 200-day EMA. The market retested the uptrend line but failed to decisively clear the 50-day EMA overhead. If bulls reclaim $3.50, next resistance lies at $3.80, followed by $4.00, both key psychological levels.

Failure to hold $3.38 support could open the path toward $3.20, and ultimately $3.00, which has historically marked seasonal floors. Despite strong on-paper demand from Europe, technical exhaustion and seasonal bearishness are gaining traction. The Baker Hughes gas rig count held at 108 rigs, below the 15-month high of 114, signaling stable but cautious upstream sentiment.

Verdict: Bearish-to-Neutral Bias Returns Without Fundamental Catalyst

While the recent rally in Natural Gas prices drew energy bulls back to the market, fundamentals show cracks beneath the surface. LNG exports remain under peak, demand forecasts are easing, and production is hitting new records. Short-term traders may find tactical upside toward $3.80, but the lack of a supply shock or structural demand rebound caps the medium-term outlook.

Natural Gas (NG=F) is best viewed as a Hold at these levels. Upside may persist on technical momentum, but without fresh bullish catalysts, the risk-reward skews toward bearish. Should price breach $3.38, a bearish reversal becomes likely. Only a sustained breakout above $3.50, supported by LNG flows and hurricane disruptions, would tilt bias toward a bullish conviction.

That's TradingNEWS